Company Spotlight MarketWatch: Telecoms

Company Spotlight: Vodafone Group

Vodafone has announced that it will launch a customer services offering that is available directly on the
mobile phone handset so that consumers can access customer care and billing information in real-time.

The service will not only provide customers with a self care facility, but will also provide Vodafone with an added
opportunity to provide interactive promotions and tutorials, such as step-by-step guides on how to use the
mobile internet to download music or how to send an MMS.

SNAPin Software, a specialist in mobile self-service software, has agreed to provide the capability that will allow
the service to be rolled out. Initially, the service will be available on open OS handsets, including S60, UIQ and
Microsoft Windows Mobile, with the aim of extending it to the majority of handsets on offer from Vodafone over
time.

The SNAPin service will enable customers to navigate an on-screen visual menu of options that can be used to
answer questions or solve problems right on the handset. Customers also have the option to connect through to
the call centre, bypassing traditional IVR menus, or to get an automatic response directly on their phone. The
menu can also be tailored according to the needs of different customers.

Business description

Vodafone Group (Vodafone) is a leading mobile telecommunications provider, with operations in Europe, the
Middle East, Africa, Asia Pacific and the US through its subsidiary undertakings, associated undertakings and
investments. The group provides a range of mobile telecommunications services, including voice and data
communication services. The company has equity interests in 25 countries, through its subsidiary undertakings,
associated undertakings and investments. It also has a number of partner network arrangements. At the end of
March 2007, the group had 206 million customers globally.

The group operates through a single reportable business segment: supply of communications services and
products.

The group's mobile telecommunications offering includes a range of voice and data mobile telecommunications
services, including text messages (short message service, SMS), picture messages (multi media message,
MMS) and other data services, and is developing and enhancing service offerings, particularly through third
generation (3G) mobile technology, which is being deployed across the majority of the group's operations. The
group provides its services to consumers and corporate customers through a variety of both prepaid and
contract tariff arrangements.

The group currently offers its mobile services over a global system for mobile communications (GSM) network
and wideband code division multiple access (W-CDMA) 3G network. Vodafone offers 3G services in 14 of its
controlled operations.

Vodafone operates 2G (second generation) networks in all of its mobile operating subsidiaries, principally
through GSM networks, offering customers services, such as voice, text messaging (SMS) and basic data
services. In addition, the majority of the group's controlled networks operate general packet radio service
(GPRS), often referred to as 2.5G. GPRS allows mobile devices to be used for sending and receiving data over
an internet protocol-based network, enabling wireless access to data networks like the internet.

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 42 -
Company Spotlight MarketWatch: Telecoms

Vodafone also offers a variety of services on its Vodafone live portal, such as picture and video messaging, ring
tones and music downloads, news and many other services.

Vodafone's 3G networks, operating the wideband code division multiple access (W-CDMA) standard, provide
customers with mobile broadband data access, allowing data download speeds of up to 384 kilobits per second.
Vodafone has expanded its service offering on 3G networks with internet and e-mail access, video telephony,
full-track music downloads, mobile television and other data services, in addition to existing voice and data
services. The group has secured 3G licenses in all jurisdictions in which it operates.

Vodafone's principal mobile operations are located in Germany, Italy, Spain, the UK and the US, with the
group's 'other mobile operations' covering operations in Europe, the Middle East, Africa and Asia Pacific. In
addition, there are a number of central functions that provide services to the mobile operations.

Vodafone has a controlling interest in a non-mobile telecommunications business in Germany. It also has
arrangements to market certain of its services in additional territories, through partner networks, without the
need for equity investment. The group's non-mobile telecommunications businesses comprise interests in Arcor,
Neuf Cegetel and Bharti Airtel (Bharti Tele-Ventures).

In Europe, Vodafone holds interests in a variety of countries such as the UK, Portugal, Spain, Greece, Hungary,
Poland, Romania, Ireland and the Netherlands. Vodafone also has controlling interests in SFR in France and
Omnitel in Italy, which operates under the Vodafone brand name.

Vodafone's operations in the US include its 45% stake in Verizon Wireless, a joint venture between Vodafone
and Verizon Communications.

In the Asia Pacific region, Vodafone's activities include its operations in Australia, New Zealand, China, India
and Fiji where the group offers mobile services under its own name along with its equity stakes in other
companies.

Vodafone's activities in the Middle East and Africa include its operations in Egypt, Kenya, Malta and South
Africa.

Key Facts Major Products & Services

Address Vodafone Group PLC Voice services

The Connection Messaging services
Newbury Data roaming
Berkshire DSL
RG14 2FN Data services
UK
Website www.vodafone.com Vodafone Live
Games
Telephone 44 1635 33 251 Ringtones
News
Employees 66,343 Sports
Financial Year End March Information
Turnover (£ Mn) 31,104
New York Ticker VOD Vodafone Simply
Vodafone Push Email
Vodafone Wireless Office

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 43 -
Company Spotlight MarketWatch: Telecoms

SWOT Analysis

Vodafone Group (Vodafone) is a mobile telecommunications group, with operations in Europe, the Middle
East, Africa, Asia Pacific and the US through its subsidiary undertakings, associated undertakings and
investments. The group provides a range of mobile telecommunications services, including voice and data
communication services. The group has strong market share in Germany, Italy, Spain, the UK and Egypt.
Strong market share enhances the brand image of the company. However, increasing competition threatens
to erode the market share of the company.

Table: SWOT Analysis

Strengths Weaknesses

Leading market position Declining margins

Extensive global reach and diversified Poor returns

revenue base
Declining revenue from voice services
Strong network infrastructure

Opportunities Threats

Cost reduction initiatives Competition

Acquisition of Hutchison Essar Mature markets

Technology developments EU regulation on international roaming

Source: Datamonitor

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 44 -
Company Spotlight MarketWatch: Telecoms

Strengths

Leading market position

Vodafone Group is the world's leading mobile telecommunications group. It has operations in Europe, the
Middle East, Africa, Asia Pacific and the US through its subsidiary undertakings, joint ventures, associated
undertakings and investments. The group had equity interests in 25 countries. As of March 2007, Vodafone had
206 million customers.

The group has a considerable market share in Europe: Germany (36%), Italy (33%), Spain (31%) and the UK
(26%). In the EMAPA (Eastern Europe, Middle East, Africa and Asia Pacific and affiliates) region the group has
a strong market share in South Africa (58%), the US (25%), Egypt (48%) and Australia (18%). A strong market
share enhances brand image and leadership in the established markets, giving a strong base to extend the
group's operations into potential and new markets.

Extensive global reach and diversified revenue base

The group has strategically expanded its presence across the globe through the acquisition of controlling stakes
in various companies and partner networks. At the end of March 2007, the group had equity interests in 25
countries through its subsidiary undertakings, associated undertakings and investments. Its partner network
arrangements extend to a further 38 countries. The group has significant mobile operations in countries
including Germany, Italy, Spain, the UK, Egypt, Kenya, South Africa, Australia and New Zealand.

In addition, the company's revenues are geographically well diversified. For instance, in 2007, the group's
largest geographic region, Germany, contributed 17.1% of the total revenues. This was followed by the UK,
Spain, Italy and 'other Europe', which contributed 16.3%, 14.1%, 13.5% and 13.5%, respectively. Middle East,
Africa and Asia contributed 8.2%, while Eastern Europe contributed 7.9%. Arcor and Pacific contributed the
remaining 9% of the total revenues. The group's global reach, along with its diversified revenue base, enables it
to offset the losses and risks associated with business concentration.

Strong network infrastructure

The group has strong network infrastructure that supports its operations. Mobile networks cater to the voice and
data service requirements of its customers. The group operates 2G networks in all of its mobile operating
subsidiaries through GSM networks, offering customers services such as voice, text messaging and basic data
services. The group's controlled networks also operate on the GPRS or 2.5G network standard. GPRS enables
wireless access to data networks like the internet. The group also controls 3G networks, operating on the W-
CDMA standard, which enables mobile broadband access. The group has secured 3G licenses in all
jurisdictions of its operations. The group's expenditure on the rollout of 3G networks in 2007 was £625 million.
Strong network infrastructure enables the group to supports its business operations and cater for the growing
needs of its customers.

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 45 -
Company Spotlight MarketWatch: Telecoms

Weaknesses

Declining margins

The group has recorded declining margins in the past few years. Vodafone's operating profit margin declined
from 29.5% in 2005 to a negative margin of 5.0% in 2007. Also, the operating profit of the group declined from
£7,878 million in 2005 to an operating loss of £1,564 million in 2007. The net profit margin of the group has
shown a similar trend, declining from 24% in 2005 to a negative return of 17.4% in 2007. In addition, the net
profit of the group decreased from £6,410 million in 2005 to a net loss of £5,426 million in 2007.

Also, Vodafone has been lagging behind the industry. For instance, for the five year period ending 2007, the
group recorded negative operating margins and negative net profit margin of 11.8% and 22.5% as compared to
the industry average positive returns of 9.7% and 4%. Falling margins indicate cost pressures, and a continued
decline in margins would affect the financial position of the group.

Poor returns

The group has recorded poor returns over the past few years. The group recorded a negative return on assets
of 4.7% as compared to the industry average of 1.4% for the five year period 2003–07. For the same period,
Vodafone recorded a negative return on investment and a negative return on equity of 5.3% and 6.7%,
respectively, against the industry averages of 2% and 7.7%. Poor returns indicate ineffective utilization of the
group's assets and reduced investor confidence.

Declining revenue from voice services

In 2007, the group's revenue from voice services declined 2.6% over those in 2006. Voice services accounted
for 78% of the group's revenue in 2007. Driven by the increase in customer base and various usage stimulation
initiatives and competitive tariff ranges, the outgoing voice minutes have increased by 20.7% across Europe. In
Germany and Spain, the outgoing voice minutes have increased by 35.7% and 34.2%. In spite of the increase in
outgoing voice usage; in Vodafone's voice usage in its major geographic markets, the outgoing voice revenue
per minute decreased by 16.8%. The competitive pricing of outgoing services have caused a decline in
revenues. A continued decline in the revenues of this major segment would adversely affect the total revenues
of the group.

Opportunities

Cost reduction initiatives

Vodafone has implemented cost reduction initiatives in the last fiscal year. These initiatives include outsourcing
the application development and maintenance for key IT systems and network sharing deals, among others. In
October 2006, the group formed agreements with EDS and IBM to provide application development and
maintenance services to various operating companies under the group. The group has also targeted network
sharing deals in various operating companies. Network sharing deals enable the fast and cost-effective rollout of
networks. The group's operating profit margin and net profit margins have improved in the last year, indicating
lowered cost pressures. Successful implementation of these initiatives would provide the group with better cost
structure and improve the profitability of the group.

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 46 -
Company Spotlight MarketWatch: Telecoms

Acquisition of Hutchison Essar

The group completed the acquisition of a 52% stake in Hutchison Essar, a mobile telecommunications operator
in India, through the acquisition of CPG Investments in May 2007. As a part of this acquisition, the group also
acquired a stake in Telecom Investments and in Omega Telecom. India is one of the fastest growing telecom
markets, with approximately 6.5 million new subscribers being added every month. In addition, India still has a
low penetration rate of around 13%. Hutchison Essar has a presence in 22 out of the 23 license areas in India.
At the end of 2006, it had 23.3 million customers, equivalent to a 16.4% nationwide market share. The group's
acquisition of a stake in Hutchison Essar gives it access to the growing Indian market.

Technology developments

The group has strong research and development capabilities for applied research in mobile and data network
communications. The group's research centers are located in Newbury, Maastricht, Munich, California, Madrid
and Paris. The group's current research includes wireless technologies beyond the current generation, the
internet communications platform, mobile TV and media, and service enabler technology such as near field
communications.

In June 2007, the group launched HSDPA technology-related broadband mobile services in Eastern European
countries. The group is also focusing on improving the data transfer speed in the HSUPA networks that enable
sending data from mobile to internet. The group has also expanded its 3G coverage across the European
networks, which will enable wider uptake of in-demand high speed data services. Established infrastructure and
global operations enable rapid commercialization of new technologies and enable the group boost its revenues.

Threats

Competition

The group operates in the highly competitive and rapidly changing technology-based telecommunications
industry. The focus of competition in many of the group's markets is shifting from customer acquisition to
customer retention, as the markets are becoming highly penetrated. The group competes with national and
international players in various markets where it operates, as well as with the Mobile Virtual Network Operators.
Major competitors of the group include France Telecom, T-Mobile, Nextel Communications, Hutchison 3G,
Sprint and Telecom Italia.

Intense competition increases churn rates and requires the company to reduce the prices that it charges for
mobile services. Indeed, in 2007, the group's revenues declined due to the competitive pricing in the European
region. Furthermore, competition also requires the group to increase subsidies for handsets. Increasing
competition could adversely affect the group by eroding its market share.

Mature markets

The European markets where the group has a significant presence and in which it generates a considerable
proportion of its revenues have high penetration rates. The penetration rates in Germany, Spain, Italy and the
UK are estimated to be 104%, 143%, 110%, and 137%, respectively. High penetration rates indicate that the
majority of the population is using telecommunication products and services. A focus on mature markets will
make it difficult for Vodafone to gain incremental revenues from these regions.

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 47 -
Company Spotlight MarketWatch: Telecoms

EU regulation on international roaming

In February 2006, the European Commission proposed new legislation on 'roaming' under Article 95 of the EU
Treaty. The legislation was aimed at reducing what the commission considers to be the excessive prices
charged by mobile network operators for international roaming services. These proposals were adopted by the
European Parliament on May 23, 2007 and came into force on June 30, 2007.

The regulation required mobile operators to offer, within one month of the regulation coming into force, a 'Euro-
tariff' under which the cost of making calls within the EU was capped at 49 eurocents and the cost of receiving
calls within the EU was capped at 24 eurocents. Customers who had not already opted for another roaming tariff
were automatically put on the Euro-tariff within three months of the regulation coming into force. The regulation
also required wholesale roaming charges within the EU to be capped at an average rate of 30 eurocents per
minute within two months of the regulation coming into force. Operators also had to provide certain tariff
transparency services to customers when they roam. The level of the retail and wholesale caps will fall further at
12 and 24 months following the application of the regulation. The enforcement of such regulations requires the
group to reduce its roaming tariffs, which could adversely affect its revenues.

© Datamonitor, A p r i l 2 0 0 8 www.datamonitor.com
- 48 -